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TUPE - settlements

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[Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary]

In a TUPE transfer, does a settlement agreement with one employer automatically bar off claims against other actual or potential  Respondents?

No, says the Employment Appeal Tribunal in Tamang v Act Security Limited

When there is a TUPE transfer, there is often more than one employer in the frame.  This is particularly acute in service provision changes and in cases under TUPE regulations 13-16 (information and consultation) where, in the latter case, there is potential joint and several liability among the employers. 

On a service provision change concerning a security contract, an ACAS settlement agreement  releasing claims was entered into with the original employer, Reliance (now Securitas).   But this did not include two other potential parties, ACT Security Ltd and Euro Storage UK Ltd.  When the employees decided to prosecute claims against these other parties, were they prevented from doing so by the original compromise agreement?

The employment tribunal said they could not sue.  It considered the agreement with Reliance was a release of all three tortfeasors (relying on Chitty on Contracts to the effect that a release by one debtor releases the others).

The EAT held this was wrong.  On the true construction of the agreement this was a covenant not to sue Reliance, and not a release of all Respondents. Its scope only related to Reliance and not by implication to others.

This shows how important it is for all potential parties in a TUPE transfer to be signed up to a settlement agreement if finality is required.